Gold and commodities

Training 785 minutesinvesting in gold

You are 47 and run a farm. Your relatives have kept their savings in gold all their lives and say you should too. Gold is at a record high in the news.

Training goal: Give gold its proper place

▶ Play this training

Situation

1. Your relatives: "Gold always goes up, move all your savings into it."

Hold a small share, 5-10%
Move everything into gold
Skip gold: I have deposits and funds

2. In what form do you buy gold?

Jewelry: pretty and an investment
A gold fund or bars with a small spread
An online "gold account" paying 2% a month

3. Gold rose 25% this year, and its share of your portfolio went from 8% to 11%. Everyone is buying coins.

Buy more on the wave
Trim back to 8%
Sell all the gold at the top

4. An ad for an oil fund: "Commodities rise with inflation!"

Put in a whole month of savings
First learn how the fund works
Buy since inflation is high

What you will learn

Gold is optional portfolio insurance, 0-10%.
Jewelry is not an investment: the markup is lost on resale.
Commodity funds lose money rolling futures.

Your real-life step

Ask two dealers for the buy and sell-back price of the same gold bar. The gap is your real entry cost.

Questions and answers

Is gold a good investment?

As a small hedge for crises, it can be. Many portfolios do fine without it. As a core holding it is weak: long term it grows slower than stocks and pays no income.

How much gold should I have in my portfolio?

A common guideline is 5-10%. More than that tends to drag on long-term growth.

Is it better to buy physical gold or a gold fund?

Bars need no middleman but require storage and carry a spread. A fund is cheaper to buy and sell, but ownership is on paper.

▶ Play this training Track your budget in Hanimani

More trainings in this module

Numbers are illustrative. A game, not financial advice.